INDIANAPOLIS
(AP) — A patchwork system of outdated technology and a work culture that
sacrificed accuracy for speed were at the heart of $526 million in tax
errors, according to an independent audit of Indiana’s Department of Revenue
released Monday.

Auditors for the
international accounting firm Deloitte also discovered additional errors
with 55,000 taxpayer accounts and 2,880 tax refund requests that were never
processed, but said the errors were “miniscule” compared to the larger
errors which spurred lawmakers to seek an audit in the first place.

The audit
results were released at a hearing Monday afternoon as lawmakers prepare to
write their next biennial budget next year. State budget forecasters said
Indiana is expected to modestly improve its tax collections over the next
two years.

Legislative
Republicans have already said they would like to restore some service cuts
made in the last few years, and they will also weigh a proposal from
incoming Gov. Mike Pence to cut the state income tax by 10 percent. Pence
said Monday’s estimates bolster his case for a tax cut. But Republican
leaders, most notably Republican House Speaker Brian Bosma, have expressed
doubts about Pence’s proposal since October.

The Deloitte
audit caps a year of questions about the state’s ability to accurately gauge
what it’s taking in and how much it has to spend. Auditors Kathie
Schwerdtfeger and Bari Faudree described Monday a system in which speed
trumped accuracy.

“As indicated in
the risk assessment, the (revenue department) seemed much more focused on
efficiency of tax processing than they were on ensuring a strong system of
control and accountability over taxpayer funds,” Schwerdtfeger wrote in the
report.

Faudree and
Schwerdtfeger also pointed out that the state’s collage of multiple filing
and processing systems led many workers to create workarounds to maintain
accuracy and consistency, a problem that could easily be fixed by
transferring to a single integrated filing system as other states have.

Workarounds,
Schwerdtfeger said, increase “the risk of errors being made and makes
processing of transactions less efficient than they otherwise should be.”

The auditors
consistently praised the revenue department management put in place in May
for beginning to implement changes.

“It’s a cultural
shift more than anything else, so we have begun adding much more focus in
terms of the quality and the accuracy,” said Revenue Commissioner Mike Alley
after the audit hearing Monday afternoon.

Alley said he
had considered buying an integrated filing system, but estimated
off-the-cuff that it could cost the state $50 million and could be a while
before it was in use.

Deloitte’s audit
results come roughly a year after Gov. Mitch Daniels disclosed the first
major error: the misplacement of $320 million in corporate tax collections.
The found corporate tax money was used to pad the state’s coffers and cover
the cost of full-day kindergarten statewide for one year.

Democrats on the
budget State Budget Committee first called for an independent audit after
the corporate tax collection errors were discovered December 2011, but
Republicans on the panel voted twice against the idea. But Democrats and
Republicans agreed on an independent audit after the second major error was
discovered in April — dealing with $206 million owed to Indiana’s counties.

A month later,
Gov. Mitch Daniels replaced three top officials at the revenue department
with a new team, led by Alley. House Ways and Means Chairman Tim Brown was
the only lawmaker to ask the auditors a question about the findings, the
panel’s Democrats had no questions for the pair Monday.